United States needs economic reforms for better growth
Even though its rebound is one of the strongest among the OECD countries, the United States needs economic reforms for better and more sustainable, long-term growth, says the OECD’s new Economic Survey of the United States.
Overall, the US recovery has been widespread. The majority of banks have returned to good health, property prices are increasing and joblessness has declined.
However, growth could be boosted if new reforms were implemented, including:
- working conditions,
- education, and
The OECD’s suggested reforms could improve the economic outlook of America’s middle-class families.
More inclusive growth required
OECD Secretary-General Angel Gurría said:
“This isn’t a business as usual recovery for the United States – the pace of growth is slow in historical perspective. Steadfast action is needed to implement the reforms that will bolster the economy’s growth potential and make it more inclusive and greener.”
“In this regard, I particularly welcome President Obama’s recent announcement of concrete measures to cut carbon emissions.”
Job market not yet back to normal
The US labor market is not yet back to normal, the survey says. Although official statistics show that unemployment has fallen sharply, millions of discouraged workers simply stopped looking for work altogether, while a large number of part-timers would prefer to be in full-time employment.
According to a study carried out at the Economic Policy Institute, the US is still 8 million jobs short, compared to employment levels before the 2008 financial crisis.
Since the beginning of the Great Recession, the labor market in the US has trailed far behind corporate profits and the stock market. Author Heidi Shierholz said the labor market remains very weak with few job opportunities, depressed wages and high levels of long-term unemployment.
For the economy to return to pre-recession levels, it needs to create 7.9 million new jobs, which at the current rate of growth will take approximately five years.
The authors of the latest OECD report suggest business and the government work closely together to tackle these challenges. Upgrading the skills of workers should become a top priority, because this would improve productivity, which in turn would boost corporate profits and the overall economy.
The report also identified the following downside risks to the recovery:
- a possible slowdown in productivity growth,
- financial-market turbulence, and
- renewed weakness in the property market.
The exit from unconventional monetary policy should be done gradually, as the economy reaches full employment and inflation approaches the Federal Reserve’s annual target of 2%.
Income inequality too high
Compared to other advanced economies, income inequality in the US is very high, the Survey points out. Middle-class and disadvantages households have been struggling to cope with a changing job market, expensive healthcare, and the high cost of education.
The report commends the US for the following reforms that have been either implemented or put forward:
- paid maternity leave, which would help working women,
- pre-school education, which would be a good investment in children’s future, and would also help middle-class parents,
- health care reform, which would help low-income families access high-quality care, and
- dealing with mental health, which helps reduce unemployment and disability.
America’s “energy renaissance” receives a special praise. New hydraulic fracturing technologies have helped boost the recovery and create new jobs, as well as turning the US into the world’s largest producer of natural gas. The new energy source is also helping reduce greenhouse gases emissions.
The OECD wrote:
“The Survey recognizes the various environmental challenges and safety issues resulting from the new energy boom, while noting that renewable energy has also seen a welcome increase. The OECD recommends introducing an adequate pricing of greenhouse gas emissions and supporting innovation in energy saving and low carbon technology.”